Takeda takes biggest gamble of 2018 with Shire merger

Takeda and Shire have agreed on the remaining terms of their £46 billion merger, creating one of the largest pharma companies in the world.

The deal values London-listed, Dublin-based Shire at around £49 per share and will mean a merger of equals, with both sets of shareholders holding around 50% of the company.

The merger is not just one of the biggest in pharma history – adjusted for inflation it’s larger than Merck & Co’s 2009 merger with Schering-Plough – it’s also the largest ever international takeover by a Japanese company.

By revenue, the merged firm will be eighth largest pharma, bringing in around $31.2 billion a year, although the two largest firms, Roche and Johnson & Johnson also get substantial revenues from non-pharmaceutical products like devices and diagnostics.

The deal has taken months to put together and won’t be complete until early next year, even if both sets of shareholders approve it.

Audacious

And there had been suggestions that Takeda might be looking for another target after its $5 billion acquisition of Ariad at the beginning of 2017. There were also rumours that Shire was a takeover target before Christmas.

Nevertheless Takeda’s announcement at the end of March that it was considering a bid for Shire came as a surprise because of its sheer audacity.

Takeda’s CEO Christophe Weber has been attempting to turn Takeda into a global pharma company based in Japan since he took over the top job in 2015.

He said in a statement: “Shire’s highly complementary product portfolio and pipeline, as well as experienced employees, will accelerate our transformation for a stronger Takeda. Together, we will be a leader in providing targeted treatments in gastroenterology, neuroscience, oncology, rare diseases and plasma-derived therapies. We are looking forward to the benefits this combination will bring to patients worldwide, the opportunities it will bring for our employees and the returns it will deliver for our shareholders.”

Cash cow or liability?

But there are concerns. Takeda’s rationale for the takeover is that Shire will continue to pull in billions of dollars after the merger.

Drugs for ADHD have long been the backbone of Shire’s business, but many of these are now threatened by generic rivals. And its haemophilia drug franchise is threatened by a new injected alternative from Roche.

Only time will tell if Weber can manage the tricky transition and address the underlying weaknesses in Shire’s business.

Meanwhile, there is speculation that other mergers could follow – Bristol-Myers Squibb has been cited as a possible takeover target over the last few years.

At the moment, Takeda/Shire stands as the largest merger of the year so far – but it could be a catalyst for further mega deals.